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Related to arbitration: arbitration clause
Arbitration is a way to resolve conflicts between parties or individuals, and may be considered a middle ground between the more cooperative, informal nature of mediation and the more expensive, involved, and lengthy process of litigation.
Usually, when you open a brokerage account, you sign an agreement to use arbitration to resolve possible conflicts with the firm and waive the right to sue for damages in court.
Arbitration is binding, which means you can't appeal the decision or try for a different result by going to court. Most investment-related arbitration claims are handled by either NASD, the main self-regulatory body that supervises brokers, or the New York Stock Exchange (NYSE).
In arbitration, a trained impartial arbitrator or panel of arbitrators reviews the evidence, decides on the outcome, and sets any award. While arbitration is usually less expensive than litigation, arbitration and attorney fees make it a more expensive option than mediation.
arbitrationa procedure for settling INDUSTRIAL DISPUTES in which a neutral third party (arbitrator) makes an award which is usually binding on all parties to the dispute. Arbitration is usually used as a last resort when it has been impossible to reach agreement under normal procedures. Some PROCEDURAL AGREEMENTS, especially those forming part of a NO STRIKE AGREEMENT, include an automatic reference to arbitration if agreement cannot be reached during COLLECTIVE BARGAINING. The benefit of arbitration is that it facilitates a compromise solution to a dispute in a way which allows both parties to save face. The arbitrator in effect finds a middle way.
A relatively novel form of arbitration in Britain is pendulum arbitration (also known as ‘flip-flop’ or ‘last-offer’ arbitration), in which the arbitrator has to decide for one case in its entirety rather than ‘splitting the difference’. The benefits of this are said to be that it encourages more reasonable bargaining behaviour and that it precludes potentially unworkable compromises. Some of the Japanese companies which have recently opened factories in the UK have included this form of arbitration in their NO STRIKE AGREEMENTS/SINGLE UNION DEALS. See also JAPANIZATION, ADVISORY, CONCILIATION AND ARBITRATION SERVICE, CENTRAL ARBITRATION COMMITTEE.
arbitrationa procedure for settling disputes, most notably INDUSTRIAL DISPUTES, in which a neutral third party or arbitrator, after hearing presentations from all sides in dispute, issues an award binding upon each side. Arbitration is mostly used only as a last resort when normal negotiating proceedings have failed to bring about an agreed settlement. In the UK, the ADVISORY CONCILIATION AND ARBITRATION SERVICE (ACAS) acts in this capacity. See MEDIATION, COLLECTIVE BARGAINING, INDUSTRIAL RELATIONS.
A method of nonjudicial or alternative dispute resolution (ADR) which long existed at common law but has recently gained renewed vigor because of the Federal Arbitration Act and the U.S. Supreme Court's pronouncements that the Act applies to all disputes involving matters in interstate commerce. Virtually every construction contract, architectural agreement, and mortgage loan document today contains an arbitration clause and is deemed to involve interstate commerce because of the nationwide impact of those industries.The American Arbitration Association maintains a Web site at www.adr.org.
The process relies upon aggrieved parties agreeing to one or more disinterested persons hearing their complaints and defenses and then coming to a conclusion establishing the rights and responsibilities of the parties and their damages, if any. In theory, at least, the arbitrators are skilled and knowledgeable in the particular field of the dispute and allowed to factor into their decisions their own knowledge and experiences. This is in contrast to the modern jury system, in which the law seeks to obtain a jury absolutely ignorant of any details of the industry or dispute, and willing to come to a conclusion based solely on the evidence presented by the lawyers.
• Pros. The process is usually much more informal than a traditional trial, allowing a leveling of the playing field when consumers attempt to represent themselves against lawyers representing the other side. In some markets, for some types of disputes, you can reach a hearing and resolution faster and more cheaply than in the court system. For others, a shortage of trained arbitrators for complex cases means the dispute might actually take longer. There are no formal rules of evidence, and the arbitrator simply factors in issues such as hearsay when deciding how much weight to give evidence, rather than excluding it entirely. Discovery is usually very limited in consumer cases so that extensive time and money is not spent searching for documents to produce, attending depositions, and other such matters. The final judgment is confidential and not publicly reported anywhere unless
it is a money judgment not paid within the required time period, in which case the winner may record his or her arbitration award in the public records and attempt to enforce it.
• Cons. As a practical matter the arbitration award cannot be appealed or overturned, even if the arbitrator made obvious mistakes of law that directly resulted in a wrong decision. There are exceptions, but they are exceedingly technical, generally disfavored by appellate courts, and usually require a level of sophistication at the hearing level not enjoyed by most consumers. That is because, for most of the few allowable grounds of appeal, you must know those grounds and all their technicalities in advance and make tactical decisions at the hearing level that will preserve your rights to appeal. This lack of appellate rights was considered a trade-off for the ability to have an arbitrator knowledgeable about your field and supposedly able to reach a more fair decision than a jury. In reality, this rarely works out.